California postpones greenhouse-gas credits auction

Hoping to inaugurate a historic link with a Canadian province in the fight against global warming, California officials were forced instead to call off a scheduled auction of carbon-emissions allowances Wednesday due to technical problems.

The California Air Resources Board said the carbon credits auction was postponed due to “technical difficulties.” It hasn’t yet been rescheduled.

Wednesday’s auction was supposed to be the first sale extending beyond California’s borders by including the province of Quebec. Carbon credits purchased in California could be used by companies to emit carbon in Quebec, and vice versa.

Linking to another state is considered crucial in fighting climate change. So far, California is the only North American government entity with a carbon market, and state officials say that bringing more states and provinces into the fold will strengthen the overall fight against global warming.

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The postponement was a rare hiccup for the California carbon program, which held its first auction two years ago through an elaborate computerized system.

“It’s the first postponement they’ve had; it’s the first technical issue they’ve had,” said Jon Costantino, a senior adviser on carbon trading with the Manatt law firm in Sacramento.

David Clegern, a spokesman for the Air Resources Board, said there was a problem with access to the electronic auction platform.

“Some participants could get in, some couldn’t, and everyone needs the same opportunity to participate,” Clegern said in an email. He said the first-time inclusion of market participants from Quebec wasn’t a factor. The auction platform is overseen by a Sacramento nonprofit called Western Climate Initiative Inc.

While the system has worked smoothly so far, the entire carbon program has come under increasing scrutiny in recent months because, starting Jan. 1, motor-vehicle emissions will become part of the carbon initiative, meaning that gasoline wholesalers will have to purchase credits. That’s expected to increase gas prices, although the amount of increase is the subject of considerable disagreement.

The carbon allowance auctions, held quarterly, are at the heart of the state’s climate-change initiative. Under the rules of the so-called “cap and trade” system, more than 400 industrial users in California are subject to a ceiling on the amount of carbon they can emit into the atmosphere. The ceiling falls slightly every year. The affected industries get many of their credits for free, but have to buy the rest, either at the state-run auctions or on the open market.

The idea behind the market is to put a price on the right to emit carbon – currently about $12 a ton – in order to give companies an incentive to reduce their emissions. Costantino said market participants are anxious to know when the next batch of carbon credits will be auctioned.

“The market is expecting them,” he said.

The government of Quebec said the new date “will be announced as soon as possible.”